Crystal ball gazing – the art of predicting the future course of the market and individual stock prices – is chiefly what Wall Street is all about.

In the 1980s and early 1990s, market guru Elaine Garzarelli was one of the masters of this art. She was so skilled, in fact, that investors hung on her every word, and the market often moved in reaction to her comments.

Now, some 30 years later, her crystal ball gazing skills remain very much in evidence. Early last April, for example, with the market in the midst of a correction and worrywarts everywhere, Ms. Garzarelli predicted in a New York Sun interview that stock prices would rise 10% to 20% over the next 12 months. Her reasoning at the time: Her 14 key market indicators were literally shouting that the bull was ready to romp.

Indeed, romp it did as the S&P 500 has since shot up about 17%, while a number of key market averages streaked to multiyear highs.

So what’s ahead? “A lot more oomph,” says Ms. Garzarelli, skipper of Garzarelli Capital, a New York stock research firm that doles out investment advice to 104 institutional investors, each of which manages assets of more than $100 million.

Declaring that “we’re in an unmistakable bull market,” she sees both the Dow and S &P 500 hitting all-time highs over the next 12 months, with each advancing in that period around 20%.The Nasdaq, she predicts, will do even better.

Why so optimistic? The key reason, she explains: Her 14 market indicators are holding firm in bullish territory.

Likewise, she points out, “this is the best economy I’ve seen in my career.” Projecting GDP gains of 3.3% this year and 2.5% in 2007, she points to such plusses for corporate America as:

* Profits, as a percentage of GDP, are at an all-time high.

* Productivity is very high.

* The cost of labor (70% of a company’s costs), reflecting low wages, weakening unions, and heavy outsourcing, is currently growing at a meager 1% to 1.5% a year.

* Technology spending designed to cut costs is really paying off.

* Balance sheets have been greatly strengthened, with corporate debt to net worth at the lowest level in 18 years and companies flush with cash.

Another market plus, according to our bull, is the increasing amount of bearish sentiment among investment advisers (usually a good contrary indicator). As of now only 58% are bullish. Ms. Garzarelli recalls that rallies last April and October both kicked off with about 59% of investment advisers bullish.

What about rising short-term interest rates? “Maybe short-term rates (now at 4.5%) go to 5% or 5.25%, but that’s it,” Ms. Garzarelli says. She reasons that consumption is slowing, commodity prices are falling, and inflation is low, with the core rate (minus food and energy) at a paltry 1.8%. She also thinks that Fed chief Ben Bernanke isn’t about to risk a crash in housing, which is already cracking.

What would turn our bull into a bear? Barring the unexpected, she 1191 2174 1294 2185mentions two factors: if the price of oil were to rise close to $100 a barrel (it’s now in the low $60s), or if long-term bond yields were to climb to 6.5%, which is about 200 basis points higher than they are now. Either could choke off the economy.

Ms. Garzarelli’s favorite stock sectors – two she thinks will take off domestically and around the world – are capital spending and technology, which accounts for about 40% of all capital spending. She expects domestic capital spending expenditures for plant and equipment to rise 9% this year, followed by a 7% increase next year. Included in her enthusiasm for this sector is her expectation of export growth of 7% both this year and next.

Her top capital spending-related stock picks include United Technologies, Boeing, Cummins Engine, Oracle, Caterpillar, and Motorola. Her enthusiasm for Motorola largely centers on the fact that China will spend billions on wireless upgrades for the 2008 Olympics. Within this arena, she also favors the S &P Select Industrial SPDR Fund, an exchange-traded fund listed under the symbol XLI that features a variety of big-name industrial companies, which realize 40% to 50% of their business from abroad and some of which are mentioned above.

In May or June, after her expected end to Fed tightening, she thinks it behooves investors to begin looking at the financials, notably the banks. Among her best bets are Bank of America, U.S. Bancorp, Wachovia, Citigroup, and Morgan Stanley. A couple of other stocks she likes are DuPont and Altria. By the same token, she says she would shun the housing consumer sectors, which she thinks will lag the market this year.

Her final thought: “This is no time to be a wimp; investors should stock up on stocks.”